Blog:Foster's develops Asian beer-fear

Foster’s Group CEO Trevor O’Hoy appears ready to sanction the next significant move in his so-far short tenure at the Australian drinks company, as exclusively revealed by just-drinks on Monday (13 March).

Just a year after creating a global premium wine business with the acquisition of Southcorp, just-drinks understands he has turned his attention to beer, specifically in Asia.

Foster’s brewing operations in China, India, Vietnam and Fiji have improved in recent years but it appears that returns have not been high enough to justify the company holding onto them. A strong presence is vital for generating long-term sustained growth in the emerging beer markets of China and India and though Foster’s has enjoyed some success, notably in India, the company has not been able to compete with the world’s dedicated beer giants.

Foster’s has found it tough to expand its brewing footprint in India, given the dominance of United Breweries and SABMiller, while the company has been left behind in the consolidating Chinese beer market by the likes of InBev and SABMiller.

However, Foster’s remains committed to growing its flagship lager brand in Asia, where beer consumption is among the fastest-growing in the world. The company has enjoyed successful licencing deals on the Foster’s brand in Europe and the US, and analysts believe that a sale of its assets in Asia would include similar arrangements for the region.

So, who would the potential bidders be? Just-drinks understands that a number of global brewers have declared their interest – with the obvious front-runners being SABMiller and Scottish & Newcastle.

SABMiller is keen to build its footprint in India and is understood to be attracted to Foster’s Chinese assets while, earlier this year, it entered the buoyant Vietnamese beer market for the first time. SABMiller also holds the licence to Foster’s in the US. S&N, meanwhile, has driven Foster’s sales in the UK under a similar licencing agreement and would be attracted by the growth of the Foster’s brand in India, where it holds a stake in the country’s largest brewer.

And let’s not discount brewers like Heineken and InBev, who are said to be keen to enter the Indian market and who would also be eyeing Foster’s assets in China closely.

No matter who the buyer, Foster’s O’Hoy knows a sale of the company’s Asian brewing assets is sure to bring in much needed cash, which the company could look to invest behind its burgeoning wine business.